Investor confidence in Germany fell noticeably in July as rising oil prices and the prospect of higher interest rates checked the pace of an upturn in the euro zone's biggest economy, a new survey showed today.
The ZEW economic research institute's economic expectations index, based on a poll of 306 analysts and institutional investors, fell by 9.9 points to plus 10.4 points in July.
The sharpness of the decline was unexpected. Analysts had been projecting only a slight easing in the index to just under 20 points after the barometer declined slightly last month.
'Economic expectations indicate that the German economy will start 2008 with a slowdown in momentum,' said ZEW President Wolfgang Franz.
The main factors behind this were 'the upward trend in oil prices and rising interest rates. And experts are also more critical about the outlook for the US economy,' Franz said.
'On top of this, the rising value of the euro against the dollar makes the situation more difficult for German exports,' he added.
The ZEW indicator represents the balance between positive and negative expectations for the economy, the biggest in the eurozone, over the next six months.
If most analysts and institutional investors polled believe the economy will improve, the index shows a plus. If most are expecting a deterioriation, the index shows a minus.
Analysts and insitutional investors assessments of the current economic situation also slipped.
The current situation index eased by 0.5 of a point to plus 88.2 points.
